Cacciola v. Nellhaus, P-448

• Decision Date: 08 September 1999
• Docket Number: P-448
• Citation: 733 N.E.2d 133,49 Mass App Ct 746
• Court: Appeals Court of Massachusetts
• Parties: (Mass.App.Ct. 2000) ERASMIA CACCIOLA, executrix, <A HREF="#fr1-1" name="fn1-1">1 vs. HOWARD NELLHAUS. No.: 97- Argued:

Page 133

733 N.E.2d 133 (Mass.App.Ct. 2000)

ERASMIA CACCIOLA, executrix,¹ vs. HOWARD NELLHAUS.

No.: 97-P-448.

Massachusetts Court of Appeals, Middlesex

Argued: September 8, 1999.

Decided: July 31, 2000.

[Copyrighted Material Omitted]

Ieuan G. Mahony for the plaintiff.

George A. Berman (Susan Reidel with him) for the defendant.

Present: Jacobs, Dreben, & Beck, JJ.

BECK, J.

The plaintiff is the widow of Salvatore J. Cacciola, one of four brothers who were partners in a real estate investment business. She is also the executrix of her late husband's estate. The defendant is the lawyer who represented the partnership. The plaintiff filed suit against the defendant after learning that he had also represented one of the other brothers, Edward, in Edward's purchase of the partnership share of another brother, Anthony, who had died. The complaint was in three counts: legal malpractice (count one); interference with contractual relationship (count two); and violation of G. L. c. 93A (count three). A Superior Court judge dismissed the complaint pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 755 (1974), on the ground that there was no attorney-client relationship between Salvatore and the defendant and that Salvatore had no standing to sue on behalf of the partnership. We conclude that it was too early in the proceedings to dispense with the plaintiff's complaint.

1. Factual background. "[A]ccept[ing] the allegations set out in the amended complaint as true," Wolf v. Prudential-Bache Sec., Inc., 41 Mass. App. Ct. 474, 475 (1996), citing Nader v. Citron, 372 Mass. 96, 98 (1977), the facts are as follows. During his lifetime, Antonio Cacciola acquired considerable residential and commercial real estate. On January 1, 1985, as part of his estate plan, he set up a partnership called Cacciola Associates (partnership). As established, the partnership, to which he conveyed his real estate interests, had five partners: Antonio and his four sons, Edward, David, Anthony, and Salvatore. Two years later, the father died. His four sons assumed responsibility for the partnership. Each then held a twenty-five per cent interest. Anthony died in January, 1988, eight months after his father.

The partnership agreement provided that if a partner died, the surviving partners could continue the partnership. The agreement also set out the procedure for the partnership to purchase the partnership share of a deceased partner. Each partner had equal authority in the management of the partnership, and all decisions affecting the conduct of partnership affairs were to be made by majority vote. Edward and Anthony were in charge of the daily management of the partnership, for which they each received compensation of two and one-half per cent of the gross income of the partnership. They did not have authority over matters requiring the agreement of the partners.

Howard Nellhaus, the defendant, served as legal counsel to the partnership from 1985 until at least 1995. Following Anthony's death, the defendant advised the three remaining partners to execute a document entitled "Exercise of Option to Continue Partnership." The document provided that Anthony's estate would become successor-in-interest to Anthony's partnership interest. The surviving partners discussed having Anthony's son, Anthony Jr., succeed his father as a full partner if that were feasible or arranging for the partnership to purchase Anthony's share from his heirs. No action was taken on either of these alternatives.

In March of 1992, Edward, Salvatore, and Salvatore's son and daughter met at the partnership office. Edward reported that Anthony's heirs appeared ready to sell their share of the partnership. He said the partnership "might be able to 'pick up' those interests for an amount as low as $250,000, which . . . Edward . . . thought would be a very favorable figure." Salvatore responded that the partnership should acquire Anthony's share, but emphasized that the partnership should pay a fair and equitable price to Anthony's heirs. Edward said nothing further to Salvatore on this subject.

In August, 1993, Salvatore received a financial statement from the partnership's accountant showing Edward with a fifty per cent interest in the partnership. It was then Salvatore learned that two months before, Edward had purchased Anthony's share from Anthony's heirs. The purchase price was $300,000, which was substantially less than the fair-market value of Anthony's share of the partnership and its assets. Edward had falsely represented to Anthony's heirs that Salvatore was not interested in buying Anthony's share, and secretly had purchased Anthony's share of the partnership for his own personal benefit. Anthony's heirs testified (the complaint does not indicate the occasion of the testimony) that, had they known that Salvatore was interested, they would have included him in the sale.

Several months after learning of Edward's purchase, Salvatore discovered that the defendant had served as Edward's lawyer in the transaction. The defendant had advised Edward that Edward had the "right and authority" under the partnership agreement to purchase Anthony's share without notice to Salvatore. When Salvatore sought information about the transaction, the defendant refused to provide any details, claiming the information was confidential and that as an attorney he could not disclose it.

2. Prior proceedings. Salvatore filed an action against Edward in January, 1994. In July, 1995, Salvatore died. In June, 1996, Salvatore's wife, Erasmia (plaintiff), filed this action in her role as executrix claiming that the defendant "in representing and protecting the interests of Edward and withholding key information from Salvatore, while purportedly acting as counsel for the partnership, violated the obligations he had as counsel to Salvatore, a partner in the partnership." The complaint, after amendment, alleged malpractice, interference with a valuable opportunity of the partnership, and violation of G. L. c. 93A. The defendant filed a motion to dismiss the complaint on the ground that as attorney for the partnership, he owed no enforceable duty to Salvatore; that Salvatore lacked standing to bring an action for damages to the partnership; and that the G. L. c. 93A claim fell with the failure of the malpractice claim. Mass.R.Civ.P. 12(b)(6).

A Superior Court judge allowed the defendant's motion to dismiss the malpractice and c. 93A counts on the ground that there was no attorney-client relationship between Salvatore and the defendant. The judge ruled that "although [the defendant] may have breached a fiduciary duty owed to Salvatore as an attorney representing the partnership, [the plaintiff] cannot allege facts which would establish a positive attorney-client relationship."

The judge dismissed the interference count on the ground that the claim of damage belonged to the partnership and that therefore Savatore lacked standing to bring that action as an individual. The judge also concluded that the defendant did not know of Salvatore's interest in buying Anthony's share of the partnership, and therefore could not have intentionally interfered with Salvatore's contractual opportunity.

3. Discussion. a. Standard of review. "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Nader v. Citron, 372 Mass. at 98, quoting from Conley v. Gibson, 355 U.S. 41, 45-46 (1957). "[A] complaint is sufficient against a motion to dismiss if it appears that the plaintiff may be entitled to any form of relief, even though the particular relief he has demanded and the theory on which he seems to rely may not be appropriate." Nader v. Citron, supra at 104, and cases cited. Thus, we "assess the [allowance] of the motion to dismiss by referring to whatever legal theory might support [the plaintiff's claim]." Ibid. In making that determination, all allegations in the complaint, and the inferences in favor of the plaintiff to be drawn from them, are to be taken as true. Id. at 98.

b. Legal malpractice and breach of fiduciary duty. In order to prove a claim of legal malpractice, the plaintiff must show that the defendant owed him a duty of care arising from an attorney-client relationship. See Spinner v. Nutt, 417 Mass. 549, 552 (1994), citing 1 Mallen & Smith, Legal Malpractice 8.1 (3d ed. 1989). There was no error in the judge's ruling that the complaint failed to allege facts to establish an express attorney-client relationship between Salvatore and the defendant. See Robertson v. Gaston Snow & Ely Bartlett, 404 Mass. 515, 522, cert. denied, 493 U.S. 894 (1989). Compare cases in other jurisdictions recognizing the possibility that counsel for a partnership may also represent individual partners. See, e.g., Johnson v. Superior Court, 38 Cal. App. 4th 463, 476-477 (1995) (setting out factors, including size of partnership); Rice v. Strunk, 670 N.E.2d 1280, 1286-1287 (Ind. 1996) (discussing aggregate versus entity theory of partnership); Arpadi v. First MSP Corp., 68 Ohio St. 3d 453, 456-458 (1994) (aggregate theory); Security Bank v. Klicker, 142 Wisc. 2d 289 (Ct. App. 1987) (aggregate theory). Cf. Community Feed Stores, Inc. v. Director of the Div. of Employment Security, 391 Mass. 488, 490-491 (1984). Nor does the plaintiff allege that Salvatore relied on the defendant's legal advice, creating an implied relationship. See DeVaux v. American Home Assur. Co., 387 Mass. 814, 818 (1983).

However, as the judge observed, the Supreme Judicial Court has recognized (in dictum) that "an attorney for a partnership owes a fiduciary duty to each partner." Schaeffer v. Cohen, Rosenthal, Price, Mirkin, Jennings & Berg, P.C., 405 Mass. 506, 513 (1989). In extending that principle to close corporations, the Schaeffer court cited Fassihi v. Sommers, Schwartz, Silver, Schwartz &...